10 min read

Crypto Exchanges& Regulation in UAE

Top exchanges in UAE by Coincub criteria
Article review author
Jonathan Lea
UAE head image

Crypto Country Rating: 6.5/10

7.5/10
Institutional acceptance
Growing thanks to government lead
6.5/10
Exchanges & Wallets availability
Leading exchanges available but not many local origin
8/10
Government regulation
Increasing wish to become Middle East blockchain leader
5/10
Defi acceptance
Not significant
6.5/10
Financial services
Increasing enthusiasm from large investment funds, but sector unclear on taxataion
6.5/10
Transparency
More regulation attempting to tackle scams
5.5/10
Spending crypto
Low - some state-owned services accept crypto
6.5/10
Banks activity in crypto
Low - but increasing following exchange licencing

Bitcoin and crypto trading in UAE

Mixed messages appear to come out of the UAE on the question of crypto friendliness. The United Arab Emirates UAE, as a set of trading nation and the most diversified in terms of GDP within the Middle East, not surprisingly has a tradition of developing a strong all-round economy and it views new technology and ideas positively. Yet the UAE has been slow off the mark to take blockchain and crypto to heart and is only now offering licenses to the exchanges and blockchain-related companies that boost the crypto economy in any country. 

Indeed, whilst Bitcoin was initially banned, trading is now legal and the country appears to be moving fast to adopting a crypto economy. Whilst many countries around the world have delayed or played wait and see with regards to defining and regulating crypto, the United Arab Emirates (UAE) moved ahead very early with clear guidelines on Initial Coin Offerings ICOs and roles of agencies providing crypto services. 

In contrast to many countries that have developed homegrown exchanges, UAE relies on established overseas exchanges for its transactions. The biggest of these are becoming more established worldwide and offer more protection in terms of fraud or theft.  Having exchanges that have already gained traction worldwide licensed adds confidence to investors – although the drastic price drop of early 2022 may have curbed enthusiasm. Top exchanges in the UAE feature many of the usual suspects including Kraken and the UK’s very own BC Bitcoin. 

Outside of international exchanges, BTC can be obtained ‘over-the-counter’ from the numerous sellers of Bitcoin on the market. Bitcoin ATMs have yet to take off, but perhaps this will change when the exchanges become more established and greater in number.  On the matter of tax, there is no clear framework – not a good point in the Coincub ranking (efficient tax collection usually points to a more cohesive crypto strategy). Whether investors declare gains as a capital gains tax on assets or as part of income tax generally requires individuals to seek some specialist advice. Crypto can be spent online, but as yet, not on a local basis, probably due to the lack of clarification about taxes. Accordingly, the mining of Bitcoin, or other crypto is not regulated in the UAE or in any of the free zones within the UAE. The activity of mining is also not covered in any previous legislation that would be applicable. 

 

All said, with crypto and blockchain becoming embraced by the state, the UAE moves onto the Coincub ranking as much for its potential as anything else.

Spend Bitcoin and cryptocurrency trading in UAE

With Bitcoin and crypto’s late acceptance on the UAE scene, there is very little in the way of an advanced retail economy for spending cryptocurrency directly into participating outlets. This isn’t helped by the lack of direction regarding tax on spending and trading crypto retailers are probably inhibited from accepting crypto. That said, a number of state-owned companies are able to accept Bitcoin for their services along with a number of restaurants and estate agencies. For the most part, crypto is mostly limited to the inevitable international online brands which accept crypto. The quest is to find which of them is able to transport goods to the country. Oh yes, ATMs are thin on the ground – when they are numerous it is usually a sure sign of a blossoming crypto retail economy within any country

Law and crypto trading in UAE

The UAE had a slow start into the global rise of crypto, even banning Bitcoin early on – admittedly joining many other countries that were very unsure of what they were dealing with.  Times have changed. Ironically, right at the time when the UAE is taking huge steps to become a crypto trading hub (talk of a global crypto hub may be pushing it too far) the price of Bitcoin took a nosedive at the back end of 2021.

Crypto trading is legal and thrives, but the country has no specific strategy for trading crypto and taxing it. The country is massively into blockchain – the concept technology that makes for cryptocurrencies and which is now finding many other applications outside of finance. To this end, the UAE is moving rapidly to become a blockchain leader and its Blockchain Strategy is the instrument to pursue its vision.

The Financial Services Regulatory Authority (FSRA), a regulator of the Abu Dhabi Global Markets (ADGM) is the first body in the UAE to provide guidance across the range of crypto activities, from indirect crypto-related services to exchanges. The FSRA also guides the growth of Initial Coin Offerings ICOs – these are ways of raising money for start-ups by issuing crypto tokens to raise money in a similar way to issuing shares for an Initial Public Offering. As well as ICOs, the FSRA also guides the implementation of virtual currencies when they are being offered for sale to investors.

Paying tax on my crypto trading in the UAE

Paying tax on crypto – or rather not paying tax on crypto is a huge attraction in the United Arab Emirates. There is no clear framework for crypto tax – not a good point in the Coincub ranking (efficient tax collection usually points to a more cohesive crypto strategy). There is no capital gains tax on crypto profits and much depends on which jurisdiction you live in and your status as a resident or expat. That said it’s a good idea for individuals to seek some specialist advice because Bitcoin is still a slightly misty play and largely unaccounted for in the tax system. As an investor, you may wish to treat gains as capital gains and hold funds back, or consult a tax office for information. As the UAE surges forward on its crypto odyssey its highly likely that strategic guidance – one way or the other – will be forthcoming from the government.

Tax relief, changing residency and gifting crypto coins UAE

As inferred by the previous section, tax relief doesn’t really come into it regarding your crypto gains – or losses, for that matter, as there appears to be no tax on crypto anyway – or capital gains tax. As before the advice is to seek specialist tax advice regarding your situation within the jurisdiction you live within the UAE.

Crypto mining regulations in Israel

Bitcoin mining is alive and well in the UAE – it’s actually flourishing. There is no tax (to speak of, but as ever seek advice first to make sure) and no specific taxation policy or regulation around mining. There are actually highly advanced, specialist companies selling all-powerful crypto mining hardware to help you make that high-tech plunge into fantastic wealth. How long things will stay like this and continue to flourish is anyone’s guess but at the moment it’s full steam ahead.

Planning your retirement and investing in cryptocurrency in UAE

Large pension funds and investment groups around the world are allowing for some form of crypto 

within their portfolios, Germany for example has recently given the go-ahead for a proportion of crypto investing within savings and pensions funds. Such investing is usually only for professional bodies and not the man in the street. Likewise, many advanced economies are allowing crypto to comprise some part of strategic investment – but for large institutional bodies which can plan for and rationalize the risks and benefits. Anyone wishing to acquire crypto for their own pension – or savings, is at liberty to do so through recognized investment trusts such as Dubai-based Sarwa which holds cryptocurrency as part of their portfolio of investments on behalf of customers.

UAE’s Financial services’ outlook on Bitcoin and the crypto economy

The government’s late turbo-charged enthusiasm for crypto and blockchain obviously directly affects the financial institutions of the UAE. In the field of financial and capital markets, the UAE Central Bank and the Securities and Commodities Authority (SCA) are the federal regulators and much activity has been centered around licensing of exchanges, security and safety. Up until late, local banks – like so many around the world, are unsure about handling crypto transactions for their customers, let alone offering full-blown custodial services between customers, wallets and crypto exchanges. Anti money laundering requirements and know-your-customer (KYC) obligations are obviously most applicable to banks and UAE banks have found it easier not to open bank accounts for crypto trading businesses. The situation is changing rapidly, however, probably led more by the possibilities that blockchain has to offer and the UAE’s governing bodies enthusiasm for it.

UAE and DeFi: the latest developments

Deregulated Finance is a much-used phrase, but whilst the concept is linked to blockchain and decentralized ledgers, it’s still only in the assessment stage for national economies which value tradition and control. Not many central banks and their governments are ready to think of a decentralized finance system for their countries’ economies for example. Like nearly all governments, the UAE is not seriously advocating DeFi at a strategic level but where the DeFi concept is being exploited in smaller tactical applications around the world, in the UAE there is no wish to support DeFi in relation to cryptocurrency. Also on the ‘at arm’s length’ list of new concepts are NFTs and no regulatory framework has been considered for how to accommodate them as applying to intellectual property laws for example. It’s highly likely that NFTs, with their growing, if somewhat controversial, popularity will soon acquire some form of regulation – DeFi would seem to require more of a sea change in thinking before we see it take or – or not.

Crypto security, transparency and compliance in UAE

The UAE authorities are just as concerned with fraud and consumer protection as all governments. 

The DFSA advises all investors to undertake checks and be aware of the risks and pitfalls – both the choice of investment vehicle and the ever present reality of price volatility. One principal reason for the FSRA’s decision to regulate crypto was to prevent fraud and negligence. As with the country’s late take-up of the crypto phenomenon, scams and frauds were probably able to take advantage of people’s lack of experience. Criminal and civil penalties could apply to crypto fraud and the names of violators can be made public. Much advice on security and safety abounds with the emphasis very much on individuals taking adequate advice and precautions on a personal level.

Helpful?
FAQ

New to crypto? Here’s our guide!

FAQ Image #1 01 Why Bitcoin? It seems like the buzz around Bitcoin just keeps growing. Bitcoin is a constantly evolving technology with a passionate community. What is it about the digital asset that makes it such a controversial topic and attractive investment?
FAQ Image #2 02 How to Get Started with Bitcoin It can be difficult to get past the technical jargon surrounding bitcoin (BTC) and other cryptocurrencies in order to figure out how you can buy and store them. Beginners can purchase Bitcoin, for example, on many exchanges using fiat currency like U.S. Dollar, Euro or British Pound.
FAQ Image #3 03 Blockchains 101 Blockchains are a type of database where data is stored in blocks that are chained together. As new data comes in, it is entered into a block, which is then chained to the previous block. The Bitcoin blockchain serves as a ledger that records every Bitcoin transaction in history.
FAQ Image #4 04 Bitcoin in the Real World Ok - you’ve found an exchange, bought your Bitcoin, and stored it safely. What’s next? By now you can buy just about anything with Bitcoin if you try hard enough, from Amazon gift cards to an old master painting. You can also convert your BTC to fiat with ATMs, an exchange, and more.

What people say about us

Aayush Bhatnagar JIO - Senior Vice President

Coincub is a novel crypto exchange aggregator that helps investors to compare different exchanges before taking their decision.

James Gillingham Co-Founder and CEO at FINXFLO

The most comprehensive analysis I found. Have a look, you might be surprised.

Jonathan Knegtel CEO Blockdata

Coincub looks dope! Nice one!